Does An LLC Have Its Own Credit Score?
Business credit scores can be complicated. But as a business owner, they could determine whether you’re able to qualify for your next business loan or credit line. That’s why we’ve created this guide. It highlights everything you need to know about LLC credit score. Keep reading to learn how they work, why they matter, and the steps you can take to build business credit more effectively.
Read More: Best Registered Agent Services 2023
What is LLC Credit Score?
LLC credit score is another way to say business credit score. This is similar to your personal credit score in that it’s also a three-digit number that is supposed to be indicative of how financially responsible you’ve been with debt as a business owner.
You may be able to use a business credit score to procure a business loan or take out new business credit cards. The key difference between this and a personal credit score is that your business credit score is attached to your EIN, whereas your personal credit history is tied to your social security number.
Does an LLC Have Its Own Business Credit Score With The Rating Agencies?
Yes, LLCs are businesses that need to have active employer identification numbers. This automatically means that they have a business credit report on file with the major business credit bureaus.
Your business credit score will take into account a wide variety of factors, such as your payment history, business finances, and previous credit applications. The credit reporting agencies look at all of this information and then give small business owners a business credit profile and score.
Business Credit Report
Your business credit report is compiled by business credit reporting agencies. Here’s a closer look at what you should know about it.
What is It?
Your business credit profile is essentially a look at your financial history as a business owner. It’s designed to show potential lenders what their risk would be if they were to approve your application to borrow money. Major credit bureaus compile the score for your business entity based on a variety of pre-determined factors, which you can often find listed on a small business financial exchange.
What Does It Tell You?
Your business’s credit reports contain both an overall score and a more detailed breakdown of credit history. They’re very similar to a personal credit report, but for your business instead of you as an individual.
Some of the information that the major business credit bureaus may include in a business credit file include:
- Payment history, such as on an existing business loan or small business credit card
- Public records like bankruptcies and lease evictions
- Financial statements
- Account balances in your business bank account
The key thing to note is that business credit bureaus don’t look at your personal credit scores or personal assets. They only care about your business finances.
You may still need to provide information about your personal finances and credit history when applying for a business loan if your business credit isn’t good enough. But those will come from your personal credit score and credit report rather than any business credit reports.
What is a Good Credit Score for an LLC?
A good business credit score is typically between 600 and 800. If your LLC has a credit score in this range, it will have an easier time qualifying for most business credit cards and business loans.
Small business owners without strong business credit already may need to take action to build small business credit over time. Building business credit with the three major credit bureaus may require establishing credit as a small business owner by guaranteeing your business’s credit with personal loans or your own personal credit score.
You can provide a personal guarantee to establish credit for your business entity. Then, each credit reporting agency will pay attention to your payment history and you’ll start building business credit and improving your business credit score over time.
How to Calculate Your Business Credit Scores?
It’s not really possible to calculate your business credit score independently, just like you can’t calculate a personal credit score on your own. The best way to figure out your business credit score is to look at your business credit reports.
That being said, your business credit score is made up of the following factors:
- Outstanding balances
- Payment history
- Credit utilization
- Business size
- Number of years in business
- Number of credit accounts open
- Any liens, defaults, or bankruptcies your business may have
If you aren’t happy with your business credit score, you can focus on improving each of these factors. As they get better, your business credit reports will improve and your credit scores will go up, just like they would if you were in the process of building personal credit.
How to Separate Your Business from Your Personal Credit Scores?
One aspect of trying to build credit for your business is making sure that you keep your personal finances separate from your business finances when possible. Here are a few steps you can follow to ensure your business remains its own legal entity and credit card companies treat its cash flow as such.
Get an EIN from The IRS
The first step you need to take is to apply for an EIN from the IRS. This is what all business credit scores are tied to. If you don’t have an EIN, there’s no way to build a business credit score, apply for a business credit card, or build business credit so you can pay for future business expenses with credit when necessary. That’s why this is the first step in keeping your personal and business finances separate.
Register for a D-U-N-S Number
Next; you may want to obtain a D-U-N-S Number from Dun & Bradstreet. This is short for Data Universal Numbering System. It’s a unique nine-digit identifier for companies in the United States and Canada. It’s something you may need to start establishing business credit and working toward a good business credit score. Some credit reports will list it and some business credit agencies will want to see it.
Have a Dedicated Phone Line
Next, make sure you have a separate business phone number. This helps to establish your business as a separate legal entity, which is a big part of achieving good business credit. Alongside your dedicated business phone line, you should also have a business address if you don’t have one already – even if you run your company primarily online.
Open a Business Bank Account
Now it’s time to open a business checking account. This is an essential indicator of financial health that most small business scoring service providers look at. Be sure to send your cash flow through the business account as well. Otherwise, your business’s credit will be difficult to establish independently from your own good credit score.
Start with a Business Credit Card.
At this point, you’re ready to begin working to build business credit. The best way to start is with a credit card. If your business credit scores are decent, you may be able to qualify for one right away. Otherwise, you may need to guarantee a business credit card on the basis of your personal credit score to get started.
This will help you build business credit. Then, in the future, you will be able to apply for business financing without having to include your own credit scores to do so as long as you keep your business failure score low and avoid bad credit.
The Top 2 LLC Services
If you’re interested in business credit scores but don’t have an LLC yet, you may want to hire a service that can help you create one. Here are two providers that stand out.
| ZenBusiness | Northwest Registered Agent | |
| Award | Best Overall | Most Affordable |
| Price | $0 – $299 + state filing fees | $0 – $225 + state filing fees |
| Rating | 4.8/5 | 4.7/5 |
| Detail | Read Review | Read Review |
| Link |
ZenBusiness
ZenBusiness is an excellent business formation service that offers low prices and expansive customer support. It can also provide ongoing support to your business, such as showing you how to use a personal credit card to establish good business credit scores.
Northwest Registered Agent
Northwest is another great option that can help you use personal credit to build to a more impressive business credit score. This provider is a bit more affordable than ZenBusiness, but doesn’t quite offer as many services.
Final Thoughts
The bottom line is that your LLC has its own credit score that’s separate from your personal credit. But you need to have an EIN to establish it, and may need to use your personal credit to establish strong business credit over time.
That being said, establishing good business credit is always worth doing. It will help you qualify for loans and business lines of credit with better rates in the future. This could help you achieve your business goals moving forward.
Yes, your LLC has its own credit score as long as you have an EIN from the IRS. You likely had to create one of these numbers when setting up your LLC.
You can find your LLC’s credit score by checking your business credit score with any of the major credit bureaus. You will typically need to know your EIN to do this and may need to provide additional information about your company.
You can work towards a higher credit score for your LLC by opening up a business credit line and maintaining a good payment history. You may need to use your personal credit score or guarantee the card with personal assets if you’re just getting started and don’t have any business credit history yet.
The main benefit of having a strong business credit score is that this makes it easier to qualify for business loans and lines of credit in the future. Having a higher score could help you achieve your business goals by giving you more financing options to consider.
A variety of factors influence your LLC’s credit score, including its time in business, payment history, and credit utilization. Factors like any previous defaults or delinquencies could also impact your score.
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